Thursday, June 08, 2006 :::
Michael hardy and Jeff Schapiro take a trip along with the boys and girls from state government to the big, bad bond houses of Wall Street to learn whether their spat over the budget will result in that most dreaded of all possible consequences, a debt downgrade.
What they discovered was not exactly the stuff of nightmares:
One of the analysts with whom Kaine met said the impasse does not immediately threaten the state's sterling credit rating -- Triple A, shared with six other states, including nearby Maryland and Delaware.
However, said Robert A. Kurtter, senior vice president for state ratings at Moody's Investors Service, his firm "is going to evaluate the circumstances as they evolve."
He said financing of highways and transit, the focus of the continuing budget fight, is only one factor in determining credit risk.
Doomsday on the horizon? No, at least not right away. But the trip does add some incentive for the worthies to stop the practiced indignation and start working much harder toward a budget agreement.
This whole excursion reminds me of something I read years ago about Bill Clinton's first days in the White House. He had great plans for expanding the size of government. But when told that the bond markets may not approve, and send interest rates through the roof, he unleashed a choice expletive and said something to the effect that why didn't anyone tell him he'd have to run all his ideas past a bunch of bond traders. I'm probably mangling that, but it's not too far off.
And it does show something the creators of constitutions never anticipated: that markets and market makers may have more power in shaping government policies than voters and their elected representatives.
::: posted by Norman Leahy at 6/08/2006